What Are Quick Payday Loans and How They Work
When you apply for quick payday loans from a reputable lender, your income will be checked plus your financial information. If your checking account is in good condition then the amount will be deposited to your account within 15 minutes or an hour. In some cases, when an electronic transfer is conducted, it could take 2 hours but not longer than 36 hours.
However, the lender will require a signed check or permission to electronically withdraw cash from the borrower’s account when the payday loan is due.
This type of loan is usually due by the next payday and it is essential that you choose wisely when taking out a payday loan. You have to remember that these types of loans are for the short-term and should be paid back as soon as you can.
In situations where the borrower fails to repay the payday loan, the lender will try to withdraw the borrowed amount and interest from the borrower’s account.
When your account is not funded sufficiently, the payday loan rollover for another cycle. When dealing with online lenders, they will initiate an electronic transfer which in turn will deduct the loan amount plus interest.
Online payday loans can go through direct payday lenders. Here, the lender or broker will sell your information to the highest bidder. However, why should you go through any middleman when you can get the loan directly from a reputable payday lender?
How Much Can You Borrow?
Quick payday loans are usually capped at $1000. The common loan amount offered to most people is $500. In some states, the loan amount is limited to 25% of the borrower’s income.
However, this does not mean that you cannot be approved for the highest cap. The payday lender will consider many factors when calculating how much loan to grant you.
Common parameters used to calculate the amount of a payday loan include payday lending history, expenses, and income.
How To Apply For Quick Payday Loans?
Qualifying for a payday loan largely depends on your income, expenses and history of your payday lending and servicing of the loan.
However, there is up-to-date information you should have at hand. You should have an active bank account, must be at least 18 years old and provide a valid national identity card or passport.
It is imperative to note that fast payday loans do not require a good credit score. However, some lenders will check with consumer reporting agencies to determine if you have outstanding loans or any history of bankruptcy. No credit checks are a fallacy as all lender perform some sort of due diligence.
Some reasons that can lead to rejection of your payday loan application include factors like you do not make enough money to service your loan, you do not meet the repayment terms, you are on active military duty and you have outstanding loans.
What Is The Cost Of A Quick Payday Loan?
The cost of a payday loan varies depending on the state you’re living in and the lenders. In some states, the interest varies from $10-$30 per $100 borrowed.
The cost of a loan depends on the lender and the credit history of the borrower. It is imperative to note that when you fail to repay the loan within the stipulated time, the loan will be rolled over and this will increase the interest.
Does Payday Loan Affect Your Credit Score?
It is essential to note that most lenders do not check the credit history of the borrower and they do not report timely payments as well. Therefore, when you repay your loan on time, your credit does not improve at all. You can look at this section on bad credit for more information
However, there is a high chance that if you default the loan after a roll over without due explanation, then the credit bureau is likely to know. However, in most cases, it is not the lender who reports this to the credit bureau but the collection agency that has been tasked with debt consolidation or collection.
Most lenders will sell the loans to collection agencies. These collection agencies will in turn try to recollect the debt by going to the house or office of the lender to obtain assets that could recover the outstanding amount.
When a collection agency finds out that there is no possibility of recovering the loan, they are forced to report you to the credit bureau.
What Happens When You Default on A Payday Loan?
Online payday lenders will try to collect the money by themselves using follow up calls. If this fails, they sell the outstanding debt to recollection agencies.
Recollection agencies will work to recover all the debts and their fees which usually increases the amount you will owe to a collection agency. In most cases, the lender will contact you regarding how you plan to repay the loan.
In other cases, they will continue to withdraw money from your account bit by bit so as to allow you to manage your regular living expenses as well as repay the loan.
However, it is imperative to note that any failed withdrawal attempts because of low funds will cause an increase in bank fees against you. At the same time, they will try all means to reach you and if all fails, then they will outsource the loan to a debt collection.
Outsourcing of debts to a debt collection agency usually happens in 30 days and this is a severe step for the borrower because the collection agency will file a lawsuit to recover their money. A court judgment may lead to seizure of assets or in some cases garnishment of your wages.
Quick payday loans are processed quickly by the lenders and all you need is to enter your name, zip code and email address. Thereafter, a match up will be done and you can choose the lender of your choice.
It is important to choose a lender whom you feel will give you the best repayment terms and lower penalty fees should you fail to repay the loan. It is recommended that you ask as many questions as possible before committing to a payday loan.
Lender terms vary and you should think through carefully before committing to a payday loan. Make sure you read all the terms and conditions.
You should repay back the money within the stipulated time. If you fail, the outstanding amount will be compounded on weekly or monthly basis which could result in high interest.